How Changing the Student Loan Payment Plan and Refinancing with SoFi Saved my Girlfriend Over 5 Years and Thousands of Dollars

I may earn money or products from the companies mentioned in this post.

Student loans can end up being one of the biggest burdens in a young adult's life. You graduate from school, life is awesome and then you realize you have to start adulting and get a real job to pay off those student loans before your grace period is up.

That doesn't sound like fun.

According to Student Loan Hero, Americans owe over $1.48 trillion in student loans between 44 million people. It's around $620 billion more than the total U.S. credit card debt.

Student Loan Hero lays out a few facts for us:

•the student loan delinquency rate is 11.2% (the number of loans that have late or overdue payments divided by the total number of loans outstanding)

•the average student loan monthly payment is $351 between the ages of 20 and 30 years

•the median student loan monthly payment is $203 for the same age range

CNN Money shows, in 2015 the average undergraduate student carried $30,100 in loans.

Scroll to the middle of this article to see how much debt students currently carry in student loans broken out by loan type, length of the term, loan status, etc.

Even worse, according to a report by US News, 25% of graduate students owe nearly $100,000 in student loans. One in ten has more than $150,000 in debt.

Which brings me to the whole point of this post. I just moved in with my girlfriend of 4 years and 8 months (but who's counting?) back in July of 2017 (it's January 2018 as I write this). We both went to the same undergraduate school up in the Bronx, but the difference between us is she went to graduate school and I did not. Her career aspirations required her to attend pharmacy school for 4 years which felt like an eternity to me since I was still at home trying to get a job for the better half of that time.

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I shouldn't complain though because it actually worked out perfectly. Her graduate school was in the town next over from my parents' house, so it was literally the best situation for us, it was great.

But anyways, she took on a big chunk of loans to pay for graduate school. And by a big chunk, I mean $165,000 (she made it to the 90th percentile woohoo!!).

Fast forward almost four and a half years, and she has passed her state exams and fortunately got one of the best starting jobs she could possibly ask for. This admittedly has put her in a better position than most people in a similar situation in regards to paying off the same amount of debt for graduate students.

But as a whole including undergrads, her debt to income ratio is a little more than the average, so she still has relatively more than the typical undergrad student.

The first time I asked her about her payment plan was before her fourth year and we both had no idea what it was or what even the exact amount of loans were outstanding. This is also a great reason why you need to be open about finances with your significant other if you think you're getting serious. If I didn't ask back then, I would've been unpleasantly surprised down the road.

Here is what we did to take control of her debt:

So, first of all, the default payment plan to pay back her loans was based on a 10-year plan. I think this is ridiculously unfair to be the default. It gives you a false sense of how much you're capable of paying upfront and how long it can really take you to pay everything back. These programs won't say boo to you if you're on a 10-year plan, because the longer your plan, the more interest they make off you.

Originally, the plan was $165,000 with an interest rate of 7.2% to be paid back over 10 years. That's misleading because looking at that you don't process how much interest that really is over 10 years. You know what the total would've been if she stuck with that plan? $231,941…$66,941 in interest. Just from interest, that's almost twice as much as the salary of my first job.

So instead, I said to her look, that's way too long to pay your loans back, there's no reason it should take 10 years especially if we're going to live together. We will make it work to have you pay them off quicker.

We cut the payment plan in half to 5 years. This took off over $35,000 in interest! How insane is that? We hardly did any revisions, just changed the length of the plan.

And before I forget, we also made the payments automatic. She set a date each month, for the payment to be automatically taken out of her checking account. This way, there is no way she will forget to make the payment. She makes the payment date the same day as her first paycheck of each month.

Always try to automate your bills. It's the best way to ensure you don't have any late payments.

Okay, so here's the best part of the story where SoFi comes into play. The company she works at offers a refinancing program with SoFi for graduate students who still have student loans to pay off. This is because typically the company hires entry-level employees who are still paying off student debt. It's a nice perk to incentivize them to stay with the company. They did it all for her.

My girlfriend casually mentioned this to me, and me not having a clue what it was about said it was definitely worth looking into. I had no idea how refinancing worked or even heard of SoFi, (formerly known as Social Finance).

So she gave her company all her student loan info, which the company gave to SoFi to figure out a refinancing program for her if she qualified. It took no more than a week to hear back. Incredibly, they were able to bring the interest rate down from 7.2% to 4.3%.

On top of that, we set the minimum payment each month to be $4,000 instead of $1,000.

The total interest to be paid over five years dropped from a little over $25,000 to a little over $13,800; less than half of the initial amount!!

So now, instead of paying back the debt over 10 years with over $65,000 in interest, she is on track to pay back all her student loans in about 3.8 years with a little more than $13,800 in interest.

So how do you know if you are eligible to receive loan refinancing from SoFi?

According to their Eligibility Criteria, here are the qualifications they look for:

•You are at least the age of majority in your state and are able to enter into a binding contract

•You are a US citizen, permanent resident or visa holder and 18 years or older

•You have to be employed, have sufficient income from other sources or have an offer of employment to start within the next 90 days

•You have graduated with an associates’ degree or higher from a Title IV school (use the link from national service.gov)

•You are looking to refinance educational debt. Bar loans and residency loans are not eligible for refinancing at this time

•Refinance loans are offered in all states and Washington D.C.

•The minimum loan amount has to be at least $5,000 or in some cases higher in specific states due to legal requirements

It seems too good to be true right? Well, let's look at the pros and cons of an article I found on the Huffington Post.

Pros:

•Low-interest rates: apparently lower interest rates will be harder to come by

•No fees: there aren’t any setup fees, hidden fees or pre-payment fees

•Unemployment protection: this I didn’t realize until I read the article which is
awesome, if you lose your job (not awesome), SoFi allows you to delay the
payments for up to 12 months for your loans; however, this only works if you
were let go and didn’t voluntarily quit

•You can refinance federal and private student loans

•There is career support including assistance with networking, building a brand,
negotiating a salary, etc.

•There is also an opportunity to join the SoFi Entrepreneur Program which allows
you to defer loans up to 6 months and gives you accessibility to mentors,
investors and networking events; again didn’t realize this until I read the
article. I personally think that’s really cool

•The customer service has also gotten really good reviews and they are available
Monday-Thursday 4:00AM-9:00PM PT and Friday-Sunday 4:00AM-5:00PM PT

Cons:

So, from what I've read, there isn't anything necessarily bad when it comes to the company itself, what they have to offer or even the experience when you're on board. The main issue seems to be the requirements themselves. Here are the requirements needed to become eligible for refinancing with SoFi:

•Good credit score: the minimum score needed is 660, and the average borrower has
a score of 774

•Decent income: The median annual income according to the Huffington Post of all
SoFi borrowers is $106,000. It’s not an automatic disqualification if you don’t
match the income, but your monthly expense to income ratio has to be good

•Your financial history and career experience is also taken into account; SoFi
wants to see you are capable of budgeting and managing your money responsibly.
However, I’m not sure what they exactly mean by career experience since my
girlfriend just graduated and was working for 6 months before she was accepted;
she did have part-time jobs during school, so maybe that was a factor, I’m not
sure

So basically the downside to SoFi is if you don't meet their education and income requirements, you don't qualify. It seems to be more geared towards educated individuals with a higher than average income. There are no explicit requirements for income at least from what I can see though. However, the higher your debt amount is, the larger your income will need to be to match the debt-to-income ratio they are looking for.

Overall, I highly recommend SoFi, if you can get accepted. Between our decision to cut the payment plan in half along with participating in SoFi's refinancing program, we shaved off years and thousands of dollars to pay back in interest.

In my opinion, you have nothing to lose to at least try to get the refinancing program even if you don't believe you will qualify. Like anything in life, if you don't ask, you'll never know. What's the worst thing they can say, no? That's fine then move on, but at least you tried.

The worst thing that could really happen is that you don't give it a shot and years down the line when it's too late you realize you could've saved a significant amount of money.

Always give it a shot.

Because look at this…$60,000 (total interest from original plan)-$12,600 (interest to be paid from revised plan) = $47,400. We plan to invest it all in an S&P 500 index fund for the next 40 years. So what does this turn into with an average 7% rate of performance?

$709,789.

Boom, enough said.

What have your experiences been like paying back loans? Do you have a favorite refinancing program you're using or know someone who is? Do you suggest an alternative?

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